Indian banks have brought bad loans down to 2.4 percent over 10 years, but now they need to be careful
The past three months have been tough for Indian banking. High interest rates and threats of a global recession have taken their toll on bank stocks. The NSE banking index fell 15 percent compared with the Nifty’s 11 percent slide in the past three months. Indian banks, ironically, have never been in a better state of health in the past 10 years.
A recent study by Boston Consulting Group (BCG) found that bad loans fell from a peak of 11.4 percent in 2001 to just 2.4 percent in 2010, showing the efficiency of management of capital. In fact, Indian banks have been performing better in controlling defaults with only 0.6 percent of loans handed out last year turning sticky, compared to 1 percent in the US and China. Indian banks also have a cost-to-income ratio of 47 percent, which is lower than Germany, France and the US.
(This story appears in the 07 October, 2011 issue of Forbes India. To visit our Archives, click here.)